8-K: Savers Value Village to Revise Non-GAAP Financial Reporting for Fiscal Year 2025

Savers Value Village announces changes to its non-GAAP financial reporting, including Adjusted EBITDA and comparable store sales definitions, effective for the fiscal year 2025.

Summary

• Savers Value Village, Inc. will change its non-GAAP financial reporting for the 53 weeks ending January 3, 2026 (fiscal 2025).
• The company is refining its definition of Adjusted EBITDA to include non-cash occupancy-related costs, pre-opening expenses, and store closing expenses.
• This change will be reflected beginning in the first quarter of fiscal 2025, and prior periods will be recast for comparability.
• The definition of comparable store sales is being updated to include sales by stores that have been in operation for all or a portion of 14 months.
• The company is adjusting its approach for calculating the tax effect on adjustments within its adjusted net income and adjusted net income per diluted share metrics, utilizing the tax rate specifically applicable to the respective adjustments.
• The company will report Q4 2024 results in late February 2025 using the previous definitions for the final time.
• The outlook for fiscal 2025, also to be provided in late February 2025, will utilize the new definitions.
• Unaudited supplemental historical financial information recasting prior periods has been furnished as Exhibit 99.1.

Sentiment

Score: 7

Explanation: The announcement is neutral to slightly positive. The changes in reporting are presented as improvements for clarity and comparability, and the company is providing recast financials for transparency. There are no explicit negative implications mentioned.

Positives

• The changes aim to better reflect the impact of new store growth on sales and profitability.
• The changes improve consistency with the reporting practices of peer companies.
• Recasting prior periods allows for better comparability of financial results.
• The company is providing supplemental historical financial information to aid in understanding the changes.

Risks

• Changes in financial reporting methods can create confusion for investors if not clearly explained.
• The new definitions may impact how the company's performance is perceived compared to previous periods or competitors.

Future Outlook

The company's outlook for fiscal 2024 Adjusted EBITDA remains unchanged at approximately $290 million to $300 million under the previous definition. Using the updated definition, the company expects Adjusted EBITDA of approximately $267 million to $277 million for fiscal 2024.

Management Comments

• The Company believes it is appropriate to refine these metrics beginning in fiscal 2025 to better reflect the impact of its accelerating new store growth on both sales and profitability, and to improve consistency with the reporting practices of peer companies with similar growth characteristics.

Industry Context

The change to a 14-month comparable store sales definition aligns Savers Value Village with common retail practice, suggesting a move to standardize reporting for easier comparison with competitors. The inclusion of non-cash occupancy-related costs, pre-opening expenses, and store closing expenses in Adjusted EBITDA provides a more comprehensive view of the company's profitability, potentially making it more attractive to investors who value transparency and comparability.

Comparison to Industry Standards

• Many retailers use a 12 or 13 month comparable store sales definition, so the move to 14 months is slightly longer than the most common practice.
• Companies like Ross Stores and TJX Companies, which also operate in the off-price retail sector, typically report comparable store sales using a 12-month definition.
• Including non-cash occupancy costs in Adjusted EBITDA is a more conservative approach, as it reflects the full cost of operating stores.
• Some companies exclude these costs to present a more favorable profitability picture.

Stakeholder Impact

• Shareholders will need to understand the changes in financial reporting to accurately assess the company's performance.
• Analysts will need to adjust their models to account for the new definitions.
• Employees may be affected by changes in performance metrics related to the new definitions.

Next Steps

• The company will report Q4 2024 results in late February 2025 using the previous definitions.
• The company will provide its fiscal 2025 outlook in late February 2025 using the new definitions.
• The company will reflect the changes in its first quarter fiscal 2025 Form 10-Q filing.

Key Dates